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Jes Staley, chief executive of fund management at JP Morgan Chase, said performance fees fell by nearly 80% last year as its flagship Highbridge hedge fund lost a third of its assets last year but performance has improved in the last three months.

Staley, who spoke at yesterday's JP Morgan Chase investor day, said performance fees fell by 79% from 2007 to 2008 and that alternative assets under management fell 32% but are now stabilizing.

Assets at Highbridge fell from $27bn (€21.1bn) to $19bn between 2007 and 2008 and total alternative assets decreased from $121bn to $100bn over the same time period.

The multi-strategy fund fell 27% last year. In contrast, there was strong performance last year from the statistical opportunities fund, which rose 22%, and the market neutral mutual fund was up 10%.

Staley said: “We are a very significant investor in alternatives and believe in the asset class long term but last year the chickens came home to roost."

JP Morgan Chase bought a majority stake in Highbridge Capital Management, a hedge fund company, in 2004 allowing the bank to become the largest hedge fund manager in the world.

Last October, Highbridge cut 10% of its staff after the third quarter of last year was one of the worst on record for performance and outflows across the hedge fund industry.

In contrast to alternatives, the private bank had net asset inflows of $75bn, up 45% from 2007 and earnings were up 10% year-on-year. Staley said the business had grown assets by a compound annual growth rate of 142% between 2005 and 2008 from $5.3bn to $75.4bn.

The private bank gained 1,400 new clients who represented more than $10m is assets last year, which Staley said was equivalent to six per day due to the flight to quality and investment performance. Nearly 75% of private bank assets under management beat client benchmarks.

Staley said: “We have seen tremendous movement due to our reputation and stability but we believe
the franchise is sustainable and very hard for the rest of the industry to replicate.”

JP Morgan Chase also attracted more than $200bn in assets to its money market funds last year. Global cash assets under management grew from $400bn at the end of 2007 to $613bn at the end of last year.

Staley said: “We manage twice as much money as our nearest competitor and once you manage more than $500bn it becomes extremely profitable.”